Ahead of the Bell: National Semiconductor
Friday June 6, 8:34 am ET
Analysts spar on National Semiconductor's margin potential after strong fiscal 4th-qtr results
NEW YORK (AP) -- Analysts took differing views Friday on National Semiconductor Corp.'s margin potential a day after the company posted strong fiscal fourth-quarter results above Wall Street's expectations.
Jefferies & Co. analyst John Lau praised the results and noted the $83.2 million profit was aided by cost control, strong manufacturing and a 65.9 percent gross margin.
In the second half of this year, however, the company may find its sales shifting toward the consumer business, which would shrink gross margins, he said.
"We believe that gross margins were at a peak for the quarter and should realign with average analog sector gross margins going forward," said Lau, who kept a "Hold" rating on shares.
Due in part to guidance for fiscal first-quarter sales above analysts' views, Lau boosted his price target to $22 from $19, implying he expects the stock to slip about 3 percent over Thursday's $22.66 close.
Yet JPMorgan analyst Christopher Danely said gross margins have nowhere to go but up and predicted they may hit 65 percent in the fiscal second quarter and march toward 67 percent by 2010.
"National continues to focus on growing its higher margin analog business and represents a successful example among semiconductor companies on business restructuring along with flawless execution toward a higher quality business model," Danely said in a note to clients.
Danely rates shares "Overweight."
A company representative was not immediately available for comment.
